i have no problem with making them live up to any signed lease agreement, even make it painful enough to stay open, but not have the power to simply make them stay open on robe's say-so
Posted on 12/03/2017 8:41:50 AM PST by Maceman
An Indiana judge has taken an unusual step and temporarily barred Starbucks from closing 77 failing Teavana stores in Simon Property Group malls because the real estate giant was less able to handle the financial pain.
Starbucks said in July it planned to shutter its 379-store Teavana operation — but Simon rushed to court to block 77 stores in its malls from going dark — claiming such a move by a high-profile tenant could spark other stores in its malls to close.
Starbucks, after trying to turn around its stumbling tea chain, said last August it was pulling the plug on Teavana.
It wanted to close all the stores by the end of the year.
But Indianapolis-based Simon, in an environment where hundreds of stores across the country are closing, rushed to a local court to ask Judge Heather Welch to stop the store closing.
Welch, in a 55-page order, found that the very profitable Starbucks could absorb the financial hit — estimated by Starbucks to be $15 million over five months — better than Simon could. The mall operator did not provide an estimate of how much the closings of the Teavana stores would hurt them.
(Excerpt) Read more at nypost.com ...
More like ‘welcome to France’.
i have no problem with making them live up to any signed lease agreement, even make it painful enough to stay open, but not have the power to simply make them stay open on robe's say-so
That was a great pop song from the late 1960s.
There’s an interesting thing buried near the bottom of the article: Teavana wants to terminate the leases early.
So it seems to be a very sick company (Teavana) which is a wholly-owned subsidiary of a very profitable company (Starbucks) trying to escape from the costs of valid lease contracts. The other party to the contracts (Simon Property Group) is not on the brink of ruin, but they aren’t healthy either. Loss of the Teavana income would clearly hurt them financially.
It seems to me that Starbucks either knew about these leases when they bought Teavana, or the leases have been renewed on Starbucks watch. Starbucks wants to stick SPG with the cost of a bad decision, but Starbucks evidently has no bankruptcy-related reason to deserve such a sweet deal.
If a company were allowed to package up its liabilities in a cash-strapped subsidiary, and then claim that the subsidiary is broke so the liabilities should be cancelled, what good would a contract be?
I haven’t read the judge’s decision, so I may have the wrong impression. But it seems to me that the decision may be perfectly reasonable.
Starbucks announced in July that it would be closing all 379 of its Teavana stores, most of which are located in shopping malls. But the nation's largest mall operator, Simon Property Group, did not appreciate the news and filed a lawsuit against Starbucks to block it from closing the Teavana stores, on the grounds that Starbucks had signed leases for those stores, and closing them before the end of the lease was Starbucks "shirking its contractual obligations." It also argued that losing a high profile store like Teavana could hurt foot traffic in its malls, and thus hurt the other tenants and cause their stores to close, too.
An Indiana judge agreed, and this week temporarily barred Starbucks from closing 77 underperforming Teavana stores in Simon Property Group malls.
The New York Post story was inflammatory and misleading.
And no, they can't just buyout their lease and walk away, that's not the agreement Starbuck's signed.
The legal principles that support the ruling are not that complicated or overreaching: Under most commercial leases, the tenant must pay rent through the end of the lease term even if the tenant vacates the premises, and therefore, the Starbucks will have to pay rent regardless of whether it stays or vacates the premises. I suspect, however, that the shopping mall owner argued that the whole is greater than the sum of its parts, and if Starbucks vacates the premises, its departure could have a ripple effect that causes other the tenants to leave and/or depresses the rental value of the property, for which it has no adequate remedy of law. Thus, the shopping mall owner probably asked the court for specific performance of the lease to require Starbucks to remain in the premises.
The legal principle -- "specific performance" -- is actually an equitable remedy that traces it roots to 16th Century English Common Law. For nearly five hundred years, judicial systems that have roots in the English common law have had the discretion to fashion equitable remedies to do justice, when the legal remedy of damages is insufficient to make a party whole. The key element is a balancing of the equities to determine which party to the dispute is likely to suffer irreparable harm in the absence of equitable relief.
In the particular case, the judge, in balancing the equities, probably determined that the harm to Starbucks to remain in the premises is relatively small compared to the harm that the shopping mall owner is likely to suffer if Starbucks vacates the premises because Starbucks must pay rent through the end of the lease term either way. Although I am not saying that I agree with the court's decision, I am saying there legal and equitable principles that support the decision.
“We need to see the contract, but this ruling doesn’t seem appropriate/legal on the face of it.”
I agree that it would be interesting to see the details of the lease.
If there are penalties for breaking the lease, as there usually are, then Starbucks should have been allowed to break the lease if they paid those penalties.
If the judge forced Starbucks to stay open even though they would have paid the penalties, then the judge is a moron.
Starbuck's signed a contract saying exactly that. Robe or no robe.
In fact, letting good ol' hippy liberal Starbuck's out of their contract because they like Social Justice would be judicial activism...
That is lawless and out of line. I hope Starbucks will comply with the letter of that black-robed thug’s ruling but not the spirit. Perhaps “reduce hours” - have one staff member go from store to store, opening each for one hour per week. How would the totalitarian class respond to that? Or do thugs get to demand specific store hours too?
I’m not so sure this is judicial overreach so much as lease breaking. I wonder if it’d be enough to satisfy the ruling if Starbucks closed the stores but paid out the remainder of the lease.
Bingo! You guys nailed it within the first 50 posts.
Starbucks legal team probably viewed the case as a cheap way to avoid some part of a payout and is no doubt not at all surprised by the ruling.
How do you know that’s not the lease agreement they signed?
I’ve closed plenty of retail stores over the years and frankly most have been more than happy to see underperforming nonanchor stores leave.
Also from the article: Welch admitted that “no court has ever entered preliminary or permanent injunctive relief to specifically enforce a continuous operations covenant against a non-anchor tenant” — but she did so anyway.
This ruling is way beyond the norm. Teavana is an underperforming boutique operation. Truly Simon’s would be better letting it go. There’s no shirking obligations going on if Starbucks gave intent and buys out the lease and fee(s). Teavana is not a high profile store...they are losing money. The mall shopper isn’t interested in them.
If you are in a mall one has to operate according to mall set hours.
When judges depart from good Behavior they can be removed.
The post I originally replied to said we needed to get rid of lifetime appointments and that would require an amendment.
“Starbuck’s signed a contract saying exactly that”
Really? You keep saying that, but nowhere have I seen the lease? And many of us are asking to see it.
Got link?
I’ve linked the LA Times story twice and you’ve read it.
I am beginning to believe that many judges are certifiable nitwits.
If Starbucks has a contract to keep the stores open he can. I suspect that the truth is different from the hyperbolic rant couched as news.
My guess as well. This looks like another case of #FakeNews.
No contract at the link?
Another story...
WTF, indeed. Where in contract law does it say that one party must consider the impact on the other party? Is there an explicit clause in Starbuck’s contract with Simon Properties that prevents it from shuttering stores?
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